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Wednesday, July 22, 2009

Ka Ching

I had a discussion on twitter about ringing the register and this commercial comes to mind. Notice the cashier was not too excited on the first ring, but got more excited on consequent rings. KA CHING!

How does this relate to trading? Seldom do we think about scaling out of a position. For me, it's not natural unless I have a large position.

I know what you are thinking, but it hit my sell target.

Most have a buy target and keeps buying as the stock goes down. This means the target was wrong.

If you have a sell target and stock stock keeps going up. This means the target is wrong.

Next time when you think about selling, sell 1/3 or 1/2.

If you can watch the market, then there is no reason why you cannot scale out.

Use multiple time frames to detect deterioration in price.

I would start with 2m, 3m, 5m and so forth. Keep in mind the shorter the time frame the more volatility and good chance of getting whipsaw.